“A Dark Store is not a weapon Darth Vader used in Star Wars, but it’s beginning to loom over many municipalities like the menacing Death Star.”
– Steve Cohen, Director of Community Development, City of Auburn Hills
Large retailers, popularly known as “Big Box” stores, have convinced the Michigan Tax Tribunal to give them special treatment as it pertains to the market value of their property.
Prior to the Dark Store theory, Michigan Big Box stores were assessed an average of $55 per square foot. Here’s where they are now compared to states where various Big Box stores are located:
In Michigan, Lowes stores are assessed at $22.10 per square foot. In Lowes home state of North Carolina, the same stores are valued at $79.08 per square foot.
In Michigan, Mendards and Target are valued at $24.97 per square foot. In Mendard’s home state of Wisconsin, the sames stores are valued at $61.23 per square foot.
Sam’s Clubs and Wal-Mart now average around $25.68 per square foot in Michigan. Studies of those buildings in the home state of Arkansas are being done, but they are likely to be much higher than they are in Michigan.
Source: Testimony from Jack Van Coevering, a Grand Rapids attorney, former Chief Judge and Chairman of the Michigan Tax Tribunal. Van Coevering now represents Michigan communities on tax assessment cases.
1. Restricting the consideration of comparable sales that have deed restrictions if those deed restrictions are imposed by the seller to keep competitors of the seller from the market.
2. Recognizing the use of all three assessment approaches (cost, sales comparison and income) based on the particular circumstances, in line with accepted national standards. 3. Examining the Michigan Tax Tribunal process to provide needed guidelines for uniform and fair treatment of appeals.
The “Dark Store” theory of property tax assessment is looming large over communities throughout the state of Michigan and unfortunately could soon be coming to a city, village, township or county near you. In fact, it may already be there.
In essence, the Dark Store theory is a tax loophole scheme being used by Big Box retailers to lower the amount they pay in property taxes. Retailers such as Meijer, Lowe’s, Target, Kohl’s, Menards, IKEA, Wal-Mart and Home Depot across Michigan are arguing that the market value of their operating store should be based on the sales of similar size “comparable” properties that are vacant and abandoned and may not even be located in Michigan.
What? You mean a fully operational store, like a new Super Wal-Mart, gets to pay the same property taxes as a closed, empty and “dark” Wal-Mart down the street? Yes, that’s exactly what the retailers are fighting for and it’s what is starting to happen more and more frequently.
The political appointees on the Michigan Tax Tribunal have upheld this “Dark Store theory” and cut property tax assessments in some cases by as much as 50 percent – impacting local revenues and subsequently local services and making Michigan one of the only places in the country that assess Big Box retail buildings in this manner. These rulings have resulted in a loss of millions of dollars in tax revenue for local governments across Michigan. This theory has a devastating effect in that municipalities don’t just lose future revenue, but have to pay back the retailers for “over-taxing them” in prior years.